Motivation crowding theory is the theory from psychology and microeconomics suggesting that providing extrinsic incentives for certain kinds of behavior—such as promising monetary rewards for accomplishing some task—can sometimes undermine intrinsic motivation for performing that behavior. The result of lowered motivation, in contrast with the predictions of neoclassical economics, can be an overall decrease in the total performance. The term "crowding out" was coined by Bruno Frey in 1997, but the idea was first introduced into economics much earlier by Richard Titmuss, who argued in 1970 that offering financial incentives for certain behaviors could counter-intuitively lead to a drop in performance of those behaviors. While the empirical evidence supporting crowding out for blood donation has been mixed, there has since been a long line of psychological and economic exploration supporting the basic phenomenon. The typical study of crowding out asks subjects to complete some task either for payment or no payment. Researchers then look to self-reported measures of motivation for completing the task, willingness to complete additional rounds of the task for no additional compensation, or both. Removing the payment incentive, compared to those who were never paid at all, typically lowers overall interest in and willingness to complete the task. This process is known as "crowding out" since whatever motivation for the task that previously existed—as estimated by the control condition that was not offered compensation for the task—has been crowded out by motivation merely based on the payment. A 2020 study which reviewed more than 100 tests of motivation crowding theory and conducted its own field experiments found that paying individuals for intrinsically enjoyable tasks boosts their performance, but that taking payment away after it is expected may lead individuals to perform worse than if they were not paid at first.
Development of the theory
History According to research on operant conditioning and behaviorism in the 1950s, extrinsic rewards should increase the chances of the rewarded behavior occurring, with the greatest effect on behavior if the reward is given immediately after the behavior. In these studies, often removing the reward quickly led to a return to the pre-reward baseline frequency of the behavior. These findings led to popular calls for the adoption of incentives as motivational tools in a variety of professional and educational contexts. Moreover, according to standard economics, providing extrinsic incentives for a behavior has an immediate relative-price effect which should produce more of that behavior by making that behavior more attractive. Literature in economics has myriad examples of this. However, Titmuss argued that sometimes adding incentives can actually diminish the rewarded behavior. Exploring this idea, Edward Deci noticed in the early 1970s that some actions appear to provide their own reward. These behaviors are described as being intrinsically motivated, and their enjoyment or rewards come from the act of engaging in the task itself. In this case, behavior does not require any extrinsic reward. These observations led researchers to ask how providing extrinsic rewards for a given activity would influence intrinsic motivation toward that activity. While the relative-price effect would predict that rewards should only enhance the attractiveness of the behavior, there appeared to be indirect psychological effects of offering extrinsic incentives that, in some cases, have the opposite effect of making the behavior seem less attractive.
Experimental manipulations
Dependent measures A wide range of behaviors has been investigated for crowding out, including completion of rote tasks, engagement with interesting puzzles, pro-social favors, creative art projects, and more. Crowding out is typically measured in two ways. First, crowding out is measured as self-reported interest in the activity after an incentive has been provided. Second, crowding out can be measured by engagement in the activity while subjects believe the experiment has ended and after full compensation has been provided. Some studies use both measures. In some cases, crowding out has been found to directly affect effort and performance on the target behavior itself even while compensated for performance. For instance, paying people a token amount of money to raise money for charity has been shown to cause people to wind up collecting less money than those who were not paid at all.
Independent variables According to a meta-analysis, three kinds of rewards are used in the investigation of crowding out. First, task-noncontingent rewards, such as show-up fees, are offered to subjects independent of task performance or completion, simply as compensation for their time. These rewards are not expected to displace intrinsic motivation. Second, task-contingent rewards, on the other hand, are incentives on the quantity, quality, or completion of some specific behavior (e.g. solving word puzzles or collecting charitable donations). Crowding out is thought to be most significant in this case. Finally, performance-contingent rewards, incentives for achieving certain outcomes, are thought to create comparatively little crowding out because they can serve as a signal of status and achievement rather than tampering with motivation.
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